Car finance firms could be seeing an issue “on par” with the PPI scandal, according to one consumer compensation expert.
It has been predicted that millions of drivers who might have paid too much for their car finance could be eligible to make claims over mis-sold car finance, depending on the result of an investigation. The UK’s financial regulator is currently looking into whether people could receive compensation for being overcharged on their car loans
The regulator is looking at hidden and unfair commission plans on loans that people took out between 2007 and 2021. Simon Evans, the head of the Consumer Redress Association, which helps claim management companies, said that people probably bought more than one car during that time.
As a result, this could double the amount of claims made. This news comes after consumer guru Martin Lewis previously said that 1.1 million people had issued complaints using a free tool on the MoneySavingExpert.com website.
He said the number of complaints was “staggering” and suggested the issue could be the “second biggest reclaim payout in UK history” after the PPI scandal.
The PPI scandal saw UK banks give billions of pounds back to customers who were unfairly sold personal protection insurance from the mid-1990s. Mr Evans said that the number of people affected by this could be as big as those affected by the PPI issue.
“If you think about the number of people who have bought cars in the last decade-and-a-half, there is a swathe of people who will have bought it in that way,” he said, referring to the discretionary commission arrangements.
“What we are seeing through our member firms who are engaging with consumers at the moment is that actually each person has an average of about 2.3 claims. So they have had two or three cars in that period and all of those qualify for a claim.”
However, he added a “note of caution on the good work Martin Lewis is doing”, suggesting that while many will have downloaded the complaint letter from MSE, it is not a guarantee that they will all have taken the next step of sending it to a lender.
Nikhil Rathi, boss of the Financial Conduct Authority (FCA), played down comparisons with PPI. He said he didn’t expect it to play out in the same way due to the watchdog stepping in earlier.